Short promotion legend Jim Chanos had a few hand-picked words for VinFast Auto, Vietnam’s auto stock prodigy, shortly before it fell more than 40% in Tuesday’s trading session.
The speculator, who made his fortune opposing Enron before its demise, hours earlier called the newcomer electric vehicle a “$200 billion inventory meme. “
“Retail is buying inventory that investors say will fall by as much as 50%. . . in the next 3 weeks,” he tweeted on the rebranded site Musk X, mentioning the implied value of selling features that expire on September 15.
It’s unclear whether Chanos is signaling that he himself is taking a short position in VinFast, just as he did with rival EV Tesla, but investors are following the Wall Street veteran for advice on the industry.
Anyway, VinFast’s stock fell thereafter.
Chanos may not be reached for comment, while VinFast representatives did not respond to a request for comment from Fortune.
The Vietnamese automaker’s debut as a publicly traded company is quite a fairy tale for the startup.
Avoiding a traditional, more rigorous IPO, it indexed earlier this month through a special target acquisition company (SPAC).
In a matter of days, it surpassed almost all cars in terms of market value.
This is despite the fact that VinFast is just a six-year-old automaker that has sold only 18,700 electric cars to date and comes from a country that built as many cars as Morocco last year.
Worse, the notoriety it has gained comes from building the worst new vehicle introduced to the U. S. market this year.
Customers were so furious that in June they temporarily followed a policy to compensate for their problems.
VinFast lost more than $80 billion in market capitalization on a single Tuesday and still ranks third among the world’s most valuable automakers, after Tesla and Toyota, highlighting the company’s overvaluation earlier this week.
To perceive VinFast’s staggering market capitalization scale, let’s compare it to its peers in the automotive industry.
According to Morningstar data cited through Yahoo Financial, Toyota’s market capitalization is lower than its profits over the past twelve months. This is a moderate assessment for a mature industry leader. On the other hand, GM and Ford get advantages from higher discounts from investors.
In the realm of expansion actions, electric vehicle brands such as Rivian, Nio and Xpeng are valued up to six times their respective revenues. Tesla, under Elon Musk’s leadership, enjoys an even higher premium, as investors expect a higher percentage of high-profit margin from its self-driving software, FSD.
By contrast, VinFast trades at a staggering 350 times its annual turnover. This raises serious questions about its valuation in the stock market.
Still, while it might be tempting for short traders to make big bets in the air and end up wasting their inflated valuation, it’s not that easy.
For Chanos or anyone else willing to place a bearish bet, simply locating a prime broker who is willing to lend the shares can prove incredibly difficult.
In fact, 99% of the shares belong to a single man: chairman and founder Pham Nhat Vuong, who at one point this week is Asia’s richest tycoon on paper thanks to VinFast.
In addition, since the bet can temporarily worsen at the slightest buying pressure, collateral requirements such as the short VinFast promotion can be prohibitive.
For those willing to risk money on such a volatile stock, it might be easier to follow Chanos’ indirect suggestion and simply look for opportunities in the asset market.